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National Competitive Advantage and relating policies in Kuwait

Discuss about the Analyzing National Competitive Advantage in Kuwait.

Kuwait is one of world’s freest economies, which has the world’s sixth largest oil reserves that enrich its economy significantly (Kuwait Times, 2018). The country has the fourth highest per capita income in the world that makes it one of the wealthiest nations (Abdulla, Naser and Saeid 2014). With the possession of a huge share in the global oil resources, it stands out to be an extra economic power. The economic success of Kuwait stands on its comparative advantages that strive to overcome the various disadvantages. The government supports a free market economy, however, Kuwait is still to prosper and succeed in the global competition. Considering the Porter’s model of Competitive Advantage, the four policies connoting to the four determinants of national competitive advantage that helps to attract Multinational Corporations and protect the domestic firms in the company. The Porter’s model shows multiple alternatives for companies to acquire competitive advantage. The four determinants of Porter’s model that serve to be the basis for analyzing and discussing Kuwait’s competitive advantage are as follows:

The competitive advantage of Kuwait, as in the case of other nations, developed with passing time. With these, the strengths of Kuwait have contributed to its current position in the world market.

The government in Kuwait has an excellent infrastructure that has highly contributed through the business atmosphere in the nation. Having an economic freedom score of about 62.2, the trade freedom shows that foreign exchange controls are rarely present enabling free capital movement into and out of the nation (Marchi, Maria and Micelli 2013). Taxation policies are weak since the legal system is not well developed. Individual income is  also not taxed and firms owned by foreign delegates along with the joint ventures are subjected to flat 15% corporate income tax (Marchi, Maria and Micelli 2013). Thus, raw materials and other necessities for business can be imported into the nation duty free. The government has been able to bring the cost of living of the people under control through stricter control of the supply of money and initiated policies for subsidising the prices of multiple commodities and services. Thus, it is very advantageous for MNCs to set in business in Kuwait’s market situation. It has the ability to grow its capital market enough through the new businesses thriving in and the domestic firms it already has (Laszlo and Zhexembayeva 2017). Together they serve to be a catalyst for development. Thus, Kuwait must adopt rational financial policies to better integrate the businesses.

Business Atmosphere

Kuwait has a population of about 4.3 million people out of which 1.3 serves to be Kuwaitis and 2.9 are expatriates (Times, 2018). The country being dominated by expatriates accounting to seventy percent of the population, it becomes favourable for the MNCs to prosper with their business renderings. However, Kuwait needs to foster on the government’s stability and its political and legal system. Many foreigners have trouble in enforcing aspects of contracts in the legal courts. Corruption serves to be widespread and the judicial system has a wide political influence that lacks transparency (Al-Saidi and Al-Shammari 2014). Thus, the country fails to diversify its economy that sets in a poor business climate. However, the social factor that strengthened Kuwait is the prevailing market that seeks quality from its domestic manufacturers. Thus, there is the creation of an atmosphere that expects high quality exports worldwide. The evolution of Kuwait’s assets has provided the pathway for various businesses such as chemical production, machineries, banking industries and others along with the huge oil industry, which it already has.

Porter evaluated that the demand determinant promotes the accumulation of nation’s competitive industries. The industrial growth of Kuwait has been widely influenced by the demand determinant factor, making it unique compared to the other Middle East’s industrial powers. The uniqueness of the industries has been growing from the arena of medium to bigger sized companies that frame the basic of the export trades of Kuwait (Sola et al. 2013). The unlimited natural resources like oil, gas, arable land and lower energy cost of Kuwait serve to be the economic factors that promote productivity. Thus, the competitive advantage in the country is rapid in various sectors. The vast oil reserves dominate the Kuwaiti economy that relies heavily on oil. Thus, various policies that would increase productivity, embarking a growth in per capita income would lead the country to be one of the leading economic nations. Considering the demand determinant with the accelerating policies, Kuwait can increase its shares in the industries of the world with a continuous flow of domestic investments.

Kuwait has not been able to diversify its economy and promote the private sector chiefly because a large section of the public sector employs about seventy-six percent of the citizens.  Moving from the economy driven by the public sector, Kuwait is now entering a new era of development in which the private sector is gaining importance and becoming the engine for growth (Mohammed 2017). The various private companies are being inspired to render greater participation in infrastructural development that includes sanitation, waterpower and others. Thus, policies relating to the privatisation in various key factors needs to be and are being accelerated. Different aspects such as public transportation, services related to port and postal system are getting the recognition of private management (Al-Shammari 2014). Various MNCs with services such as telecommunication and other developmental businesses have the opportunity for expanding industries in Kuwait’s market. However, there are uncertainties regarding the regulations that govern competition among firms.

Population growth

Kuwait has various competitive advantages for its domestic businesses and other MNCs to practice effectively in the country, however, certain competitive disadvantages seem to evolve in the market structure of the country. The companies in Kuwait are assessed to be less competitive in the world market. Moreover, they seem to be very slow in responding to the changing environment. Thus, various MNCs take a step back for establishing their businesses in the country believing that prosperity has ended. The country simultaneously incurred deficit in balance of payments for a long time. It is also reported to have a high burden of domestic debt with a partially developed stock market.  Thus, Kuwait as a whole must initiate some immediate policies to promote competitive advantages to develop its economy in the long term.

Strategies to enhance employment in Kuwait firms:

Considering employment, the various strategies that are being encouraged and adopted by the prevailing and emerging companies of Kuwait are discussed below-


  1. The government of Kuwait has already been using wage policies to achieve equality among various sectors of the economy in respect to working hours, incentives or wages. The public sector of Kuwait has been suffering from over employment (Behar and Mok 2013). Thus, the government has been encouraging the youth to be engaged in the private sector instead of waiting for public sector jobs.
  2. Students from the various universities are being subjected to transformative training and get engaged in highly demand labour market that includes science, technology and technical fields. Influencing policy has been motivating the private sector to participate in economic activities and create more job opportunities. This would balance the burden of employment of graduates in the public sector.
  3. Oil being the chief source of income in Kuwait, the nation has been experiencing some fiscal consolidation due to the fall in oil prices. However, such fiscal obstacles are not supposed to affect the employment policies. Social protection along with the promises of state to guarantee employment services and benefits to the citizens has been very effective in the country (Assaad 2014). Alongside, the support towards artisans by giving them incentives to increase their competitive abilities has been equally beneficial. With multiple financial support and administrative facilities, the country ensures the sustainability to attract the youth and graduates in better employment.
  4. The second developmental plan of Kuwait ensures health, education and social services to its workers backed by laws and regulations that assure the country’s respect towards international labour standards. Improving the business environment with major investment opportunities promotes greater employments. The establishment of joint stock companies, increasing partnership projects with private sector, improve in public projects management and the growing establishment of small businesses with improved investment rates have created more opportunities for employment in the private sector (Jehanzeb, Rasheed and Rasheed 2013). This has been leading to the improvement and growth of economy in general.

The first and second development plan of Kuwait serves to be important elements to reduce unemployment and create more job opportunities for the national labour force. Along with these, activation of the National Fund to support small and medium enterprises has been very effective for the reduction of unemployment. All these have been successful in creating sustainable jobs that have supported the main industries in the country. With greater training, the country has been provoking the youth to expand their technical, technological and vocational skills to improve their capabilities and be employed in various sectors. Thus, Kuwait as a country, with all its disadvantageous propositions has been striving hard to render greater employment and proceed to become one of the leading economies in the world.

References:

Abdulla, A.M., Naser, K. and Saeid, M., 2014. Employability factors of business graduates in Kuwait: Evidence from an emerging country. International Journal of Business and Management, 9(10), p.49.

Al-Saidi, M. and Al-Shammari, B., 2014. Corporate governance in Kuwait: An analysis in terms of grounded theory. International Journal of Disclosure and Governance, 11(2), pp.128-160.

Al-Shammari, B., 2014. Kuwait corporate characteristics and level of risk disclosure: a content analysis approach. Journal of Contemporary Issues in Business Research, 3(3), pp.128-153.

Assaad, R., 2014. Making sense of Arab labor markets: the enduring legacy of dualism. IZA Journal of Labor & Development, 3(1), p.6.

Behar, M.A. and Mok, M.J., 2013. Does Public-Sector Employment Fully Crowd Out Private-Sector Employment?(No. 13-146). International Monetary Fund.

Jehanzeb, K., Rasheed, A. and Rasheed, M.F., 2013. Organizational commitment and turnover intentions: impact of employee’s training in private sector of Saudi Arabia. International Journal of Business and Management, 8(8), p.79.

Kuwait Times. (2018). Iran eyes major economic growth next year - Kuwait Times. [online] Available at: https://news.kuwaittimes.net/website/iran-eyes-major-economic-growth-next-year/ [Accessed 4 Apr. 2018].

Laszlo, C. and Zhexembayeva, N., 2017. Embedded sustainability: The next big competitive advantage. Routledge.

Marchi, V.D., Maria, E.D. and Micelli, S., 2013. Environmental strategies, upgrading and competitive advantage in global value chains. Business strategy and the environment, 22(1), pp.62-72.

Mohammed, N.S.A., 2017. Population and development of the Arab Gulf States: the case of Bahrain, Oman and Kuwait. Routledge.

Sola, D., Couturier, J., Raiciu, C. and Cuzzolin, S., 2013. Market entry decisions in emerging economies: the choice of local intermediaries as key determinant of competitive sustainability. Examining the case of a leading MNC entering the Maghreb region. International Journal of Trade and Global Markets, 6(1), pp.51-65.

Times, A. (2018). Kuwait population rises to 4.33 mln - ARAB TIMES - KUWAIT NEWS. [online] ARAB TIMES - KUWAIT NEWS. Available at: https://www.arabtimesonline.com/news/kuwait-population-rises-4-33-mln/ [Accessed 4 Apr. 2018].

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